TV Execs Are Bullish on Q4

Ad market strengthening, despite ratings issues

Election Day brought a call for more hope and
change. For the TV business there is certainly change, and executives who run
TV companies are hoping they can find ways to monetize it.

From a distribution point of view, the third quarter usually
marks a rebound in the number of video subscribers. But this year net video
adds were up just 30,000 subs, according to an analysis of company reports by
International Strategy & Investment Group.

ISI says cable operators lost 340,000 subs, led by Time
Warner Cable, which dropped 140,000 by itself. Satellite added 50,000
subscribers and the telcos gained 320 subscribers.

Is it cord-cutting? The economy? Either way, business is

"It is no secret that the pay-TV industry continues to face
a difficult economic environment in a more price-sensitive marketplace," Joseph
Clayton, CEO of Dish Network, told analysts last week. "The pay-TV business is
now at a maturation point. The days of double-digit growth in our business are
over. Going forward, we must deal with single-digit growth, and even that rate
assumes that the economy rebounds and new home formations restart. Faced with
slow subscriber growth plus faster-than-inflation programming cost increases,
there is no question that the entire industry will have to rethink its current
business model and strategy."

Things are also tough for the programmers. The new season
has been marked by questions about declining ratings.

"This was clearly an unusual start to the season, with most
networks' ratings all over the place," Leslie Moonves, CEO of CBS Corp., said
on the company's third-quarter earnings call. "There are several factors at
work here. First and foremost, people are watching more programming than ever,
but they are increasingly time-shifting that content through the DVR,
streaming, and video-on-demand. Nielsen is doing a good job of finding ways to
measure this viewing, but not all of it is captured yet."

Moonves said increased viewing via DVR is a good thing,
because more people are watching CBS programming. "It also means that you have
to be more savvy when reading the ratings these days," he added. "It now takes
more time to determine the true performance of a show and in fact even a
network. As we move forward, we will make it a priority to get paid for all of
the viewing that is going on across our shows including DVR viewing beyond C3.
This represents a significant opportunity for us that is still in the very
early stages."

Moonves expressed hope that in the future, networks will get
paid by advertisers based on seven days of delayed viewing, up from the current
three using the C3 metric.

"I know there's been a lot of concern about the early
broadcast ratings," said Jeff Bewkes, CEO of Time Warner, which in addition to
its cable channels produces 25 shows for the broadcast networks. "Our shows are
doing great. Some of the biggest hits are from Warner Bros.," including The
and Revolution on NBC.

Cable ratings "have been stable, and there's a lot of
viewing, particularly on cable, that's happening on the VOD side that's getting
added to the consumer loyalty and engagement with the shows and with the
networks," Bewkes said. "So some of the pressure on broadcast ratings is
clearly coming from viewing on alternative platforms. And while it isn't being measured
as well, it will be soon." That on-demand viewing boosts the value of hit
shows, Bewkes noted.

In the shorter term, after a third quarter deadened by the
Olympics for everyone but Comcast and NBCUniversal, executives were optimistic
their revenue will bounce back in the fourth quarter.

"We're seeing accelerating trends across the local
broadcasting segment, which is pacing to be up double-digits for the fourth
quarter," said CBS CFO Joe Ianniello. "This is led by our TV stations, which
are pacing to be up 20%-plus, driven by the surge in political spending."

"At the CBS Television Network, scatter trends remain
healthy, with fourth-quarter pricing up in the mid-teens over the most recent
upfront," Ianniello said. "CBS continues to be No. 1 without any make-good
issues whatsoever. And scatter demand remains very strong and is in fact now
building. Yes, our pacing in network advertising is accelerating as we speak.
And as we head into the second half of the season, our momentum will only

After a drop in the third quarter, Moonves said that ad
revenue at CBS' broadcast network will be up in the fourth quarter.
"Furthermore, after we post record results for the full year 2012, 2013 will be
even better," Moonves said.

Discovery Communications CEO David Zaslav also said the ad
market is rebounding in Q4. "There was a period for about two weeks where the
pricing was there, but the volume wasn't there," Zaslav said. "We did hold
price. But the volume has come back, and the price is still more than
double-digit over upfront."

"We're on track to meet our financial objectives," said John
Martin, CFO of Time Warner, which reaffirmed its earnings guidance for 2012.
"And given our year-to-date performance, that implies that we're going to end
the year on a strong note. In fact, we expect the fourth quarter to be, by far,
our strongest of the year in terms of growth in both adjusted operating income
and adjusted net income."